One of the most important HR activities is creating and updating your company’s salary structure. It tells your current and future employees about your company values, how you prioritise different roles, and what their career path looks like.
Employees need and deserve consistency in their job descriptions and salaries. An employee who understands their position within the pay scale for their job knows what to expect in terms of a merit increase. Showing this transparency, they see how they can grow financially and it can even increase their motivation to perform well.
Decide which Compensation Survey is Right for your Company
A lot of why you choose a salary structure depends on whether your company hires from the outside or internally. If your company hires primarily internally, then there are other factors besides the market value of a job that you’ll most likely consider.
However, if you are hiring from the outside, you’ll need to decide your market position. How do you want to compare against other companies? How will the market value influence what to pay to attract and retain the best possible talent? That’s where compensation surveys come in.
Choose the Right Survey
You want reliable data when choosing compensation surveys. Avoid therefore employee-reported income surveys. Instead, choose a professional compensation survey provider. Select a compensation survey relevant for your location. There’s a long debate whether you need to purchase industry-specific surveys. For general jobs like admin roles, HR and Finance, you may opt for a general industry survey. Verify that the survey will have enough participating companies by job and job level to obtain an accurate overview.
A solid survey will look at 15 or more companies. The large survey providers will have more companies participating, however, this may also vary by the survey’s industry focus and location. Survey providers will review and check for any data inconsistencies, removing outliers to report consistent data. Make sure you understand the survey’s methodology so you make the best decisions when designing your salary structures.
Decide how Competitive You want to be
Do you want to position your company in the top 25% of your industry for pay? Maybe you want to be more mainstream and opt for the median (50th percentile)? Or maybe your focus is on non-financial rewards and you let 75% of companies pay more than you?
This fundamental question requires you to understand your Employee Value Proposition and your Total Rewards strategy. This may be influenced by what you can afford. An impact analysis showing the new salary structures, based on the survey data, can be very insightful. Are you employees below your desired position? Are they paid well above that position?
You obviously want to attract the best possible talent. However, your budget may not allow you to compete at the high end of market value. What else can you offer your employees? Or do decide to give special adjustments to those employees who are paid below the market value regardless? Find an approach that allows you to recruit new employees while retaining the existing employees. A solution may be a temporary approach with a road map to your desire state.
Take into Consideration the Limitations of Survey Data
Survey data is extremely useful when looking for the market value of a job. However, it’s not the only consideration.
Survey data presents the market value of a role, not a person or their experience. Often, it’s exactly this where managers, HR and total rewards professional differ. What do you pay for? The job or the individual’s skills set?
While salary surveys give an overview how other companies value jobs, you won’t know the specific market position of these companies. The larger the number of participating companies, the more likely it is you won’t find only high (or low) paying companies but a mixture.
If you purchase two different salary surveys with different participating companies, the data may differ. Which one do you follow? Or do you blend the data into one new number?
How well do the participating companies match your company? Are you and your competitors participating in the same surveys?
How easily can you match your jobs to the survey jobs and levels? A representative from the survey provider should be there to assist you. For unique jobs, can you even get data?
Create Your Salary Structure
Obviously creating your salary structure requires time, a good understanding of your company and impactful analyses which aren’t reflected in this article. However, survey data is an instrumental tool in appraising the value of the different roles in your company.
The Birches Group is an excellent resource for survey data and together, we can guide on how to use that data. Whatever survey you choose, just remember that your company values and employee needs are significant factors in how you create your salary structure.
Contact us and let’s discuss your company’s salary structures. When was the last time you’ve audited them? Do you recognise the meaningful adjustments to retain your top talent? Let’s identify opportunities to improve your company’s salary structures to attract and retain better talent.